Somkid, BoT soothe jitters after mutual funds sell-off
The government and financial regulators have provided assurances about the asset quality of TMBAM Eastspring’s four fixed income funds which were terminated following heavy panic-selling.
The funds in the spotlight are TMB Ultra-Short Bond Fund (TMBUSB), TMB Aggregate Bond Fund (TMBABF), TMB Bond Fund (TMBBF) and TMB Thanaplus (TMBTHANAPLUS).
Units of the four mutual funds, which invested heavily in foreign debt securities, were caught in a selling spree as investors sought to reduce their risk by holding cash against the backdrop of the Covid-19 pandemic and low-interest-rate outlook.
Deputy Prime Minister Somkid Jatusripitak said the selling of the unit trusts was not because the quality of the assets of the funds was deficient but because of panic selling, adding that the Bank of Thailand (BoT) will take care of the matter.
BoT governor Veerathai Santiprabhob said TMBAM Eastspring is not a subsidiary of TMB Bank Plc because the bank previously sold its 65% stake in TMB Asset Management (TMBAM) to Prudential Corporation Asia Ltd’s wholly owned subsidiary Eastspring Investments Singapore Ltd.
Eastspring plans to take up all the shares in the asset-management company in the near future.
The asset-management company has changed its name to TMBAM Eastspring.
He said redemption of the two funds stemmed from tight liquidity in the global bond market which has affected the Thai debenture market.
The market situation is now unusual and when the funds’ unit holders became fearful and redeemed them, the funds were forced to sell off their holding bonds despite the fact that the quality of the bonds is promising.
Mr Veerathai said there were no sign of unusual sales by unit holders of other mutual funds.
For the two scrapped funds, TMB Bank which still holds a minority stake in the company will provide a credit line with very low interest rates to unit holders who are waiting for redemption payments and want to get their money early.
Ruenvadee Suwanmongkol, the Securities and Exchange Commission’s (SEC) secretary general, said more than a half of TMBAM Eastspring’s fixed-income fund ports have been allocated to overseas bonds with investment grade, while other mutual fund operators have focused on local bonds with a credit rating of A or above.
TMBAM Eastspring faced higher selling of its fund unit trusts, particularly TMB Thana Plus fund where one third of its net asset value (NAV) was redeemed, so the company decided to close the fund to protect unit holders’ benefits, she said.